RMG Industry The ready-made garments industry in Bangladesh consists of many small to medium garment factories, both registered

and unregistered, that produce garments catering to foreign buying houses. The export income from this industry alone is one of the top three sources of ec onomic growth in Bangladesh.

The rapid growth of the ready-made garments industry in Bangladesh has been facilitated by the following factors:

cheap labour lack of employment options for women simple technology small amount of capital required and economic changes and policies that encouraged the growth of this particular industry

The relatively cheap cost of labour in Bangladesh is the reason for its comparative advantage internationally since goods can be produced at a lower cost in Bangladesh than in many other countries. This cheap cost of labour is in turn a result of national policies, massive unemployment and the willingness of women to work for low wages Ready-made garment is a success story for Bangladesh. The industry started in the late 1970s, expanded heavily in the 1980s and boomed in the 1990s. The quick expansion of the industry was possible because of the following unique nature of the industry.

The technology is less complicated (easy to transfer), Machineries are cheap and easy to operate (sewing machines), A large female labor force that is easy to train is readily available.

Situation Analysis There are two part of situation analysis:

Industry Analysis Company Analysis

Now we are taking about the situation analysis on industry. External or macro environment which is industry analysis based on situation analysis. Figure: Components of Macro Environment Industry Analysis Industry and competitive analysis uses a tool kit of concepts and techniques to get a clear idea about the industry traits, the intensity of competition, the drivers of industry change, the market positions and strategies of rival companies, the keys of competitive success, and the industries profit outlook. This tool kit provides a way of thinking strategically about any indu strys overall situation and analysis that what they should do to make profit. For this reason, competitive analysis aims at developing insightful answers to seven following questions: Question 1: What are the Industrys Dominant Economic Traits? The factor which dominates or controls the industry is called industry dominant economic traits. There are several factors which play a vital role in tea industry. They have been discussed as follows: a) Market Size and growth rate: Market size and growth rate shows the actual scenario of an industry and Garment industry is not an exception. Although progress can be measured in many ways, the most definite way is to see the market growth rate. I) Size Currently there are around 4000 factories are available in the market. The market size of the RMG industry is huge. Bangladesh is mainly export oriented country for this Industry. The current scenario gives us the feeling that the market size is consist of a large portion of our economy. Number OF factories Number of labor force Profitability Export earnings Contribution to GDP 4000 3.5 million 12.45 billion 76% 10%
2

ii) Growth Rate The growth rate of RMG sector is 21.60% annually. Ready mate garments has been the major exportable items of Bangladesh since 1980s. We had a captive export market in some countries to export products. The growth rate of this industry is increasing day by day as the population of Bangladesh is increasing rapidly. The internal demand of ready mate garment is not that much. But local consumption is increasing day by day. The scenario has been changed in recent years because of open market economy, emergence of new entrants in the domestic market with low price and rapid increase of internal demand. b) Scope of Competitive Rivalry: Scope of competitive rivalry is strong as competition in this industry is very strong. Tea industry is managed by BGMEA. As building a Garment industry have moderate complexity and moderate amount of capital is required, so the chance of getting threat from a new competitor is very high. But the existing competitors are very strong (inside our country and outsides). So, they need to focus on their strength point. c) No of competitors and their relative sizes: There are4000mills all over the Bangladesh. Some of them are very large in size with good facilities and others the of moderate size. So the number of competitors and their market size is large. Factories from outside posing threat to this sector are also of large size and providing an extra force in international market. d) Prevalence of backward/forward integration: There is a moderate domestic market to supply if garment products can be produced profitably in Bangladesh. It can easily make the forward integration. They can easily integrate with the distribution channel of garments and bring their product to the customers. If they want to establish backward integration they need to establish their facilities that provide them with values and also increase employment and productivity. e) Entry/Exit Barriers: Entry and Exit barriers act as market strength point of the market. For this industry both the entry and exit barrier is moderate. And this is being discussed as follows: Entry Barriers: i) Ability to gain access to specialized technology.

ii) Moderate capital requirements and/or almost same resource requirements for every company. As capital is required moderate amount so entry barriers are not so high. Export and import policy of the country also affects the Industry.
3

Exit Barriers:i) ii) Making frequent loss in capital investment Large amount of employees are employed

All company has to invest a lot of money to build up the entire network inside and outside of the country, so they cannot easily quit the industry. Therefore, it refers that the exit barrier is high because an investor cannot liquid all its asset and go away to another industry. f) Nature and pace of technological change: In case of Garments industry of Bangladesh, technological changes are going on recent time. Factories which can afford trying get better technology from outside and also making the existing labor force enable to make greater productivity. In Bangladesh RMG sector is operating in private so if there is any need for technological advancement companies can easily mobilize their resources to get them. g) Product and customer characteristics: The product of Garment industry is generous all over the country. Different factories produce more or less same quality product. Bangladesh is one of the largest exporters of the world. Export earning was 8.10 billion taka from this industry. The customers of this industry are aware of the product quality and design. There is no reason why Bangladesh should not be able to supply more of its Textile& RMG products in the international market. Bangladesh is one of the top 5 exporters in this sector. However, there is a huge increase in demand for Ready Mate Garment product in international market.

h) Scale economies and experience curve effect:I) Scale economies: Economies of scale means when production increases per unit of cost decreases. An economy of scale is a long run concept and refers to reductions in unit cost as the size of a facility, or scale, increases. In case of garment industry, there is an existence of economies of scale. As Bangladesh has lowest labor cost, so all the factories operating in the industry has an access to economies of scale than other country.

ii) Experience Curve Effect: An experience curve exists when a companys unit costs decline as its cumulative production volume increases. To measure both the concepts we need to deal with the unit costs of production where as importers do not manufacture the sets; they import the sets from abroad. So these two theories are not applicable for this industry. I) Capacity utilization and resource requirements RMG is the major exportable items of Bangladesh since 19780s. The scenario has been changed in recent years because of open market economy, emergence of new entrants in the world market with low priced product and rapid increase of internal demand. Export of Bangladesh in the year 2006 was 8.10 billion. Export earnings increased rapidly from 8.87 billion to 10.24 billion and 10.24 to 12.45 billion in next few years. Other Ready Mate Garments producing countries like India, Srilanka, Indonesia, china, and some other countries have relative advantages to supply textile products at a lower price that makes export market extremely competitive for Bangladesh. In case of Bangladesh, the mills are not fully utilizing the capacity due to local ineffective labor force and inadequate power supply. The industry need to access new technology in case of using low producing technology and trained and skill labor to use the available capacity. j) Profitability of RMG industry Garment industry is increasing its profit day by day but is still a large portion of its profit is not claimed by Bangladeshi companies. All the components of producing Garment products are favorable in Bangladesh. They need to focus on economies of scale and trade barrier. Years 2006 2007 2008 2009 Conclusion: Export earnings In dollar 8.10 8.87 10.24 12.45 In taka 810,000,000,000 887,000,000,000 102,400,000,000 124,500,000,000

One of the key advantages of the RMG industry is its cheap labor force, which provides a competitive edge over its competitors. The sector has created employment opportunities for about two million people of which 70 percent are women who mostly come from rural areas. Thus the industry helps in the countrys social development, women empowerment and poverty alleviation. Currently RMG earns the lions share of foreign exchange earnings.We can say that it is very much attractive industry in context of Bangladesh.

References:

www.unescap.org/tid/publication/aptir2456_haider www.wikipedia.com/bangladesh/Bangladeshi_RMG_Sector http://bizcovering.com/business/the-top-10-things-you-need-to-know-about-the-strategicmoves-your-rivals-are-likely-to-make-next-an-analysis-of-how-to-stay-one-step-aheadof-the-competition/#ixzz1IZgbG5ni